The last few years have witnessed the closure of hundreds of business schools in India. I am often asked whether this is a passing phase and whether (and when, if it is indeed temporary) the trend would reverse. The enrolment in management schools in India had shown a secular uptrend till about 2009. By the end of that year, the assessment was that India produces about three lakh management graduates every year. The closest rival of India is the USA, which produces about one eighth of that number of management graduates annually. Given that the US economy is seven times larger than the Indian economy in terms of nominal GDP, India was clearly producing far too many management graduates than what the economy could hope to gainfully absorb.
Fading MBA edu
The fad of management education had to fade. And that has happened. The enrolments in management schools in India have dropped by about 30 per cent and many schools have closed down or have significantly reduced batch sizes. The fate that has befallen management education was preceded by a similar decline in enrolments in engineering colleges. And the declining trend in demand for engineering education continues.
Economy to blame
One of the key reasons for a decline in demand for management graduates is the poor performance of the Indian economy. From a high real GDP growth rate of about nine per cent, India has seen a steady decline in growth rate. The (much debated) forecast for the current year’s GDP growth rate is around five per cent. The economy is unlikely to return to high growth any time soon. Therefore, domestic economy does not offer much hope for an upturn in recruitment.
The global economy appears to be in a worse situation. For five years, the US growth rate has been anaemic, Europe has been experiencing degrowth and China has been slowing down. In the near term, therefore, there is little reason to believe the global economy could help counter the domestic situation. Besides, recessions also accentuate the pressure on countries to preserve jobs for your own nationals.
Would a change in economic outlook and performance bring back the halcyon days for management education? Unlikely. The characteristics of the Indian economy are changing.
As newer types of economic activities take roots, existing processes become more technology dependent, and the manufacturing sector starts becoming more important, the growth in requirement of management graduates in India would stagnate.
B-schools under fire
The pressure on management schools from having to compete for students would have a beneficial impact on the quality of education offered. As and when the higher education sector is opened up and foreign institutions are permitted to set up campuses in India, the pressure on Indian management schools to improve will become even more acute.
There is also potential for consolidation of business schools. The adversity being faced by B-schools today would in the long term be good for management education in the country.